What I don't get is why I can get 1080i and 720p via a component cable from my digital cable box, but I need a DVI to get the same resolution from a DVD.

You'll never get that resolution from DVD. The format doesn't support it.

In reply to:

Are there going to be any DVD players that outbut 720p or 1080i via component cables?

The DVD standard does not include resolutions above 640x480. You will never get better than that from a DVD. You may get an HTPC or DVD player that uses a scaler to output in that format but the information itself is still 640x480.

In reply to:

My TV doesn't have DVI connections.

For DVD, unless your TV is inherently digital (plasma, LCD, etc), I don't believe you'll see a difference. At that point, the only advantage would be transporting the information digitally so that the end product has a pure source. At 480p, I doubt enough degradation can occur in component to make a difference.

I believe you can sync a HTPC to your Z1 by using Powerstrip. Unfortunately I do not know those settings but it should be easily found on avsforum. Matching your output to source will present a native signal to your projector and supposedly give the best picture possible. Some people say that this may not look any better than the average progressive DVD player which is 720x480p....true if you have your projector set to Native aspect ratio. But since your HTPC is set to 964x544 like your projector the scaling capabilities of your video card will scale up your 720x480p to 964x544. There will be interpolation to smooth out jaggies and such to give a better looking (possibly softer) picture. Some other people use really great Scalers such a DSCALER (Semi knows about this stuff) But for me the built in driver of my video card and my NVIDIA NVDVD software scales it nice and clean. So for my X1 the Powerstrip settings are set to sync with the X1 and present the picture in its native format. There are other advocates that actually upscales the HTPC resolution to like 1024x576 or even 1280x720 and then the projector downscales them to its native res. And they claim to get even a better picture because the scaler on the HTPC cleans it up and gives a nice smooth picture at high resolutions and then the projector downscales the picture to its native resolution so by then the picture is free of jaggies and it looks much smoother and very slightly softer but the overall picture quality is fantastic. I have not yet tried this out yet but i was going to try this actually soon. Someone on AVSFORUM gave me the codes for Powerstrip to set it up properly to sync with the projector at those higher resolutions.
In my opinion yes the HTPC gives the best picture...but at a price of tweaking, upgrades, hours of setup, making it WAF friendly such as programming learnig remote with keyboard keystrokes to control the HTPC. A Progressive DVD does also gives a nice picture with less hassles. I opted with a HTPC to tweak out every last detail. But once you dialed it in correctly your done.

For DVD, unless your TV is inherently digital (plasma, LCD, etc), I don't believe you'll see a difference. At that point, the only advantage would be transporting the information digitally so that the end product has a pure source. At 480p, I doubt enough degradation can occur in component to make a difference.

Today's TVs and RPTVs often process video signals digitally even though the final imaging device is analog (CRT). So there is theoretical and practical advantage in feeding them digitally.

Also, many people, at the very least those with front projectors, seem to attest that DVI-D connection does improve the DVD picture quality over component connection, often quite dramatically (although I haven't yet tried DVI myself).

We are getting into the realm of visible nuances here. In comparisons, there is little or no difference in the visible clarity and sharpness of a 720p vs. 1080i picture. I haven't seen a DVI picture output comparison, although a former colleague, David Ranada at Sound&Vision, raves about it.